“Despite the poor headline reading in the Emirates NBD Purchasing Managers’ Index for Egypt’s non-oil private sector in January, there were nevertheless some promising data in the sub-components that could presage an improvement in the Egyptian economy in the coming months,” Emirates NBD research commented.

“Egypt’s recovery over the past two years has so far largely been driven by external rebalancing and public investment, while the private sector has remained under pressure, in part as a result of ongoing reforms,” it added.

The research said that 2018 was on average (49.5) the strongest year in the PMI since 2014, with anticipation of a continued strengthening in the private sector this year.

Both output and new orders components dropped during January, and respondents attributed this decrease to adverse weather conditions and generally poor market conditions.

“External demand was also weak, as export orders experienced a fall for the fifth month in a row and business optimism among respondents fell to the lowest level since October 2016.”

These factors caused 76 percent of respondents to expect no change in conditions during current year, while only 3 percent expected a decline in conditions.

The research also stated that global instability was also a concern for respondents, adding that optimism has declined fairly steadily from its recent peak at the close of 2017.

Meanwhile, input prices declined to a series low in January, led by a marked slowdown in purchase costs.

The research attributed this drop to the beginning of a recovery from the inflationary pressure caused by cutting subsidies last July. The decline of input prices enabled firms to cut output prices, which posted a sub-50.0 reading for the first time.

“This should contribute to an ongoing decline in CPI inflation, which fell to 12 percent in December, and potentially pave the way for the central bank to begin loosening monetary policy, which would give a much-needed boost to the private sector,” it noted.

CAIRO - 10 January 2019: Egypt's Emirates NBD Purchasing Managers' Index (PMI) for the non-oil private sector rose to 49.6 in December, compared to 49.2 in November. Emirates NBD research clarified that Egypt is closing the year on a positive note.